Loyalty requires a compelling justification. It is a feeling that develops over time, and it doesn’t come from a product or a service — feelings of loyalty develop as a result of our experiences. If you love your cell phone and really enjoy using it you may tell yourself, “The next time I need a new phone, I’m going to buy this brand again.” If you have a great stay at a hotel you may decide to reserve a room there the next time you’re in town. But too often marketers offer “loyalty programs” with discounts for regular customers as a way to encourage repeat business. This misunderstands the nature of the emotion: discounts can only be rewards for loyalty, never its cause. If you hate your first experience at a hotel, will you come back a second time just to get a few dollars off your bill?

Entrepreneurs that want to establish a loyal following must provide experiences that make customers want to return. But when tasked with developing reasons for loyalty, business owners often default to slogans like “good service” or “low prices.” Because these are the most common answers they don’t differentiate your business and they aren’t compelling enough to create loyalty. Price-focused customers will leave the moment a competitor offers a lower one — only one business can ever win the "low price war." Those who choose your business for “good service” can be lost through the actions of a single inattentive employee. These kinds of default motivations are never enough to build a brand. In a crowded marketplace an effective entrepreneur must offer a compelling reason for us to choose her business.

Loyalty is a feeling, not a number, so companies that try to engender strong feelings in their customers are far more likely to reap the benefits of brand-building — it’s the feelings that create the spending, not the other way around. The brand gives us a mental “hook” that we use to attach emotion and meaning to a company and the products and services it offers. Once feelings of loyalty have been attached to a brand, we’ll return again and again, and the business will reap the financial benefits of those emotions. But loyalty isn’t permanent: if a brand loses its vision, fails to continue bringing value to the table or disappoints its customers, they will move on, and the loyalty that existed will evaporate.

Since small business owners have the opportunity to engage feelings far more effectively than large corporations, a small business that generates honest, meaningful connections with its customers can generate long-term loyalty that far outweighs any attempts by large, impersonal brands. Note that in the examples below the experiences come first, the discounts second.

Loyalty: Pam’s Pampered Pets

Pam, owner of Pam’s Pampered Pets, knows a few things about psychology: she understands that both dogs and owners need to feel comfortable with a new place before they are separated for several days. Owners must believe that their pets are carefully cared for and dogs must not feel abandoned.

In her marketing materials, Pam offers new customers the “Two Hour Time Out” a window of time when people can leave their dogs for two hours for just $20. While there, the dogs have the opportunity to get to know the kennel employees and investigate the accommodations. Owners can stay on site and watch their dogs play for a few minutes or the full two hours — whatever they need to reassure them. If they leave, they can also check in virtually via webcam.This short introductory session can create an inexpensive positive experience that generates an emotional attachment. When owners come back to pick their dogs up they receive a coupon for 10% off their first long-term stay. Since the dogs — and their owners — have become accustomed to the facilities, it increases the likelihood that owners will use Pam for long-term stays that may cost several hundred dollars.

This program also creates an opportunity for Pam to meet new dogs and get to know them before they are dropped off for a couple of weeks, giving her the chance to weed out dogs (and owners) with behavior problems.

Loyalty: Ella’s Eastside Cafe

Ella’s restaurant does a good business on the weekends, but has had difficulty increasing weekday revenue, primarily due to the restaurant’s location. Moving would be too difficult and costly, so Ella has decided to turn to catering to boost sales. To introduce prospective clients to her new catering menu she markets in-house “mini-parties.”

Potential catering customers book a special table located in the restaurant kitchen and invite up to eight guests to sample small plates of whatever they like from the catering menu at heavily discounted prices. While there, the host meets with an event planner to review a wide range of options including decorations and entertainment. This arrangement makes it possible for customers to find out what dishes they and their future guests like most. It also turns the chore of event planning into something more closely resembling a fun night in a restaurant with a group of friends.

Ella has the chance to talk with her guests before embarking on a long-term project, receiving valuable feedback on her menu and the services that guests want most. She also has the chance to figure out which events she doesn’t want to cater, avoiding a potential drawn-out battle with an unreasonable bridezilla.